This post is curated by Keith Teare. It was written by Armando Romeo. The original is [linked here]
How should a founder or CEO strategize to get their company higher valuations?
Few start-up entrepreneurs really know (or care) about their company’s valuation in the early days. Rightfully so, since they’re knee-deep into their product development and go-to-market strategies.
But, like with the butterfly effect, every little strategic decision a founder makes has a big impact on the company’s future valuation. Some of these important decisions are made early on, such as the company’s legal structure, business model, niche, and cap table.
What’s your company’s valuation?
Have you ever wondered why one company sold for 2x revenue while another, in the same sector, sold for 6x the revenue? Or how your competitor just raised 100 million dollars with revenue in the low 10s?
(For the sake of clarity, I’ll be talking about valuation in terms of revenue multiples, but you should know that there are other ways to put a price tag on a company. For example, you can use EBITDA multiples or Discounted Cash Flow, although start-ups rarely use the latter since their cash flows are often inconsistent, if not negative.)
The above chart tells us Netflix’s valuation by the public market as a multiple of its sales receipts. This graph can tell you a lot. At the moment I write this, their valuation is 8.128x their receipts. But the first thing you probably noticed is that the ratio varied a lot over time. Most dramatically, in 2018 Continue reading “6 Proven Ways to Boost Your Startup Valuation”